QLD’s new Stamp Duty rules: Rent a room, save more – but watch the tax!

New Rules Give First Home Buyers in Queensland More Flexibility

Previously, first home buyers in Queensland who received the First Home Buyer Stamp Duty Concession or the First Home Owner Grant were restricted from renting out any part of their property for the first 12 months without risking repayment of some or all of the grant.

However, as of December 2024, this rule has changed. First home buyers can now rent out a room in their home from day one without losing their eligibility for these concessions. This update provides much-needed flexibility for new homeowners, making it easier to manage mortgage repayments or generate additional income to support other financial goals.

While this change is a welcome financial boost, it’s important to be aware of the tax implications that come with renting out part of your home. Here’s what you need to know about how this could affect your taxable income, deductions, and potential capital gains tax when you decide to sell.

Beware of the tax considerations

The State and Federal governments are separate and bound by separate rules. The ATO is not state based, they are federal, therefore its important you are aware of the tax implications if you do decide to rent out a room. The following must be taken into account from a tax perspective:

• Taxable Income – You must declare the rental income you receive on your tax return even if just considered as board at less than commercial rates (https://www.ato.gov.au/individuals-and-families/investments-and-assets/residential-rental-properties/rental-income-you-must-declare)
• Tax deductions – Can be claimed on your property expenses apportioned based on the space the tenant occupies. For example, if you are renting out 1 of 4 bedrooms, you may be eligible to claim 25% of the property expenses as a tax deduction. These expenses include interest on your loan, insurance, council rates, utilities, and more. Please seek advice from your accountant for a more comprehensive list.
• Capital Gains tax – When you begin to rent space however things can become more intricate. As soon as you rent a room the “main residence exemption” does not apply. If you decide to sell your house some of the tax will need to be paid depending upon the length of time the house was rented for and how many rooms. There are two factors to consider when working out how much CGT you will need to pay. Total floor area rented, and duration of time it has been rented.

🏡 Case Study 1: Grace – Renting a Room for Long-Term Stability

📌 Scenario:

Grace recently purchased her first home under the First Home Buyer Stamp Duty Concession. She chose to rent out one of the three bedrooms to her friend James for $250 a week. Grace reported the rental income and was able to claim one third of her property expenses as deductions.

Since Grace plans to live in the property long-term and the rental income helps covers her mortgage payments, her situation works well. She intends to stay in the home for at least 20 years, and with only one of the rooms being rented to James for a year, she won’t have significant capital gains tax (CGT) in future. The rental portion remains minimal, which will help keep any potential CGT concerns in the future to a minimum.

🏡 Case Study 2: Tom – Short-Term Rental, Higher CGT Impact

📌 Scenario:

Tom recently bought a two-bedroom townhouse. After moving in, he decided to rent out the second bedroom to a colleague for $200 a week. While Tom appreciated the additional income, he understood that renting out the room could impact his ability to claim the full capital gains (CGT) exemption when he sells the property.

Tom plans to sell the townhouse in a few years and expects a significant capital gain. Since he is renting out the second bedroom, which accounts for 50% of the total space, he will be subject to a higher CGT liability when he sells the property. The short-term rental will result in a larger CGT impact, reducing his profits when the property is sold.

📩 If you are ready to buy or would like to speak to an adviser about your property goals, book a meeting with one of our mortgage brokers or advisers HERE or call 07 3221 5677.